European stock Indices gain for a third straight session led by miners

European stock indices enjoyed a third straight session of gains on Wednesday, with the FTSEurofirst 300 Index rising 1.2% in early trade, along with similar gains in the FTSE, DAX and CAC with investors optimistic after the FOMC minutes last night that the Fed could announce more easing at their September meeting.

It is hoped that weak economic data this week could maintain the high market pressure on the Fed to act and certainly the minutes from the last FOMC meeting have indicated that there is an appetite to provide more quantitative easing. If we continue to see weak US economic data, which of course being backward looking is already out of date and may therefore be largely behind the negative curve of the slowdown in US activity, the question may move from will the Fed announce QE3 to what form of QE3 may be announced in September’s two-day FOMC meeting.

It is the FOMC minutes last night and the tentative optimism of investors in Europe that is helping to push European stocks into positive territory for a third straight session, with much of the gains coming from the mining sector. The mining sector in London was the lead sector in early trading, rallying 1.5% whilst gains of 1% were enjoyed by oil stocks. It is no surprise to see these two sectors gaining the most, given that investors hope that any new form of quantitative easing may help to swell commodity prices further with fresh inflows of capital to emerging markets.

Investors still want to see the FTSE 100 trading back above key resistance levels of 5400 and 5445 to help convince that the recent rally may have longer legs than the ones we have seen over the last few weeks.

Smith & Nephew shares continue to see demand on bid speculation
Smith and Nephew shares topped the FTSE 100 leader board on continued bid speculation that helped to rally the firm’s share prices yesterday by 4%. Today’s gains of more than 7% marks two days of very strong gains for the firm, helped no end by a positive upgrade from Deutsche Bank yesterday. Media speculation that US peers Stryker Corp and Biomet could be potential suitors for the UK firm has been enough for investors to buy into the firm’s shares over the last 24 hours on speculation that a bid may indeed come.

REITs affected by broker comment
Shares of real estate firms however lagged the FTSE 100 rise on Wednesday after Morgan Stanley downgraded its views on British Land, Hammerson and Land Securities and issued a cautious note to its clients on the sector in general.

Economic data eyed for Fed clues
Investors will continue to look to economic data this week to help provide clues as to the strength of the case for more US QE, and after yesterday’s shockingly bad US consumer confidence data, today’s attention will focus on ADP Employment and Factory Orders. There is every chance that a weak report may actually not result in a bearish stock market reaction, as weak data applies more pressure on the Fed to act to curb the freefall of US growth.